Motorola said each company would be independent and publicly traded, and that the separation would provide the businesses flexibility to grow in the long term.

One company will focus on mobile devices and home devices while the rest will include its corporate business and wireless network equipment business, it said.

Motorola shares rose 3.9 percent to $6.93 in extended trade after the news.

The company had said last month that it planned to separate its handset business, which has been struggling to win back market share. But executives had also said they were looking at alternative structures.

Its set-top box had also suffered due to a weak economy, while its wireless network equipment business had been hit by a consolidation among telecom operators.

Motorola said the enterprise and network equipment business will be the entity responsible for Motorola's current public debt and will be capitalized to achieve an investment grade rating.

Motorola's latest financial results show its mobile phone business had revenue of $7 billion for 2009. The enterprise wireless business had revenue of $2 billion while home and network sales brought in another $2 billion.